First mover strategy- Advantage or Loss

Posted in Marketing & Strategy Articles, Total Reads: 4342 , Published on 26 August 2011
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Marketing is all about reaching out to the masses and showcasing the benefits that their product or service would give the customers if they were to use it. Companies always have to think from a customer's perspective and constantly innovate. Technological leadership enables an organization develop newer technology and breakthrough products. Inventing products which give new features, unmatched benefits often help companies succeed with what is known as a first mover advantage. But the success of first mover strategy is just one side of the story as sometimes it can also backfire.

 

 

First mover advantage strategy is adopted by companies to take control of a particular market segment by giving the customer a new product or service before any other competitor. First mover advantage is often beneficial for organizations as people get attracted to a newer product and the company gets a stronghold of the market. Whenever a beneficial unique product or service is launched in a market, which has no competition due to its first move, it spreads across the entire target group due to a positive word of mouth.

 

Mostly, first mover strategy is a forte of companies who have the expertise, technological innovation and the research & development to invent new products or give fresh unique services to the customers. Becoming the first company to offer certain benefits to customers, helps the company create loyal customers. The value proposition offered, the uniqueness of the product, no competition etc helps the first mover control the dynamics of the market. Moreover, it makes it difficult for competitors to get into the market as the switching cost to attract existing customers becomes higher. This aggressive strategy also ensures that the company taps the market with the initial momentum which is gained due to being the unchallenged product.

 

On the contrary, first mover strategy doesn't always lead to the success of a brand. The biggest hurdle that a first mover company faces is a financial risk.

The company tries to enter an untried market segment, and sometimes a product is launched before its time, when the people are apprehensive to adapt to the technology. This affects the financial performance of the company as huge investments in research and development do not convert into revenue, leading to losses.

 

Also, second mover or late mover strategy offers the competitors a 'free rider' opportunity. Competitors can purchase, study and improve on the product offered by the first mover and create a low cost and better quality offering. It also cuts down on the R&D costs of the company, as they simply have to work on the existing technology and they also don’t have to educate the customers. Late mover strategy also gives an opportunity to understand the market dynamics, which helps the companies to position their products effectively and show the required value proposition.

 

Companies will always have to innovate and make sure that they induce enthusiasm in people to increase brand loyalty. And tapping their imagination by becoming the first in the industry is one of the ways. But whether the first mover strategy is an advantage or a loss can never be predicted.


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